Interest paid by the Italian government on their bonds just went to 7.4% more than the Greeks when they were bailed out…interest rates on bonds are not fixed – they rise and fall against the price banks will pay for the next or current issue of bonds – so if the price goes down the interest rate or yield goes up.
This reflects the banks assessment of the ability to pay. The bankers job is not there to prop up states, their job is to assess the risk of lending to a state and work out an interest rate that balances risk and return.
http://www.reuters.com/article/2011/11/04/us-commerzbank-idUSTRE7A310P20111104
The vicious circle that ensues once they get worried about the risks of them not getting their money back and raising interest rates is inevitable and unavoidable - it's the reason why our current government is cutting as hard as it is.
If you lose market confidence in your ability to pay your loans back you are screwed in this conventional system of money creation. One of the Rothschild’s once said “Give me control of a nation’s money supply, and I care not who makes it’s laws….quite the case in Greece and now Italy..and why the people know it really does not matter anymore who is power under the current system of money creation….Banks create all our money – through debt issue – when a government issues bonds the Banks create new money in exchange
All the perplexity, confusion, and distress in our lives arise, not from defects in democracy, not from want of honest struggle and toil, but from the downright ignorance of the nature of money, its creation and circulation…without this new understanding amongst progressives Europe may well make the same mistakes as it did in the 1930’s
Germany's second-largest lender Commerzbank (CBKG.DE) will refuse loans which don't help Germany or Poland, as the euro zone crisis makes European banks more protectionist in choosing between writing new business and meeting stringent capital requirements.
